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Moody's Investors Service says a structure investors favor to securitize single-family rental home payments poses serious risks. The structure lacks protections that are common in securitizations of residential or commercial mortgages.

Related Summaries

Single-family rental houses located near college towns are among the best performing, according to a RealtyTrac analysis. Many students who live off campus choose single-family homes, providing a steady source of demand.

American Homes 4 Rent has priced its fifth securitization since May 2014 -- an offering of single-family rental pass-through certificates for a loan secured by 4,125 single-family residential properties. The company expects to raise $477.7 million.

The credit quality of residential mortgage-backed securities should strengthen next year as a result of underwriting standards, third-party reviews and risk retention rules, says Moody's Investors Service. The firm also expects an expansion of single-family rental securitizations.

After evaluating American Homes 4 Rent's $482.7 million single-family rental securitization, Kroll Bond Rating Agency, Morningstar and Moody's Investor Service have each rated the largest class in the transaction, a $270.40 million tranche, as AAA. The deal is collateralized by a single loan secured with mortgages on 3,871 single-family rental homes.

The best mispriced opportunity right now is foreclosed single-family housing, says Tom Barrack of Colony Capital. His take is that buying single-family homes and renting them out is one of the greatest investment opportunities in the last 20 years.